By Jan Webb, EnergyREV LEAD for Local Energy System Businesses and Financial Practices, Edinburgh University.
UK clean energy strategy includes decentralised, systems for heat, power, transport and energy storage using digital platforms. We aim to understand local energy companies involved in this strategy, as they are now and inform thinking on next generation business models and financing for integrated systems (National Grid, 2017).
Smart Local Energy Systems can take advantage of the growing proportion of renewable power connected to distribution networks; use ‘waste’ heat for district heat networks and thermal stores; and provide grid balancing services by managing consumption locally. This should contribute to an affordable and resilient clean energy system, with opportunities for local businesses and community initiatives. Just now, for example, Cornish homes and businesses with solar power and batteries are testing a local energy market where they can supply, as well as buy, electricity via the network. At the other end of Britain, local not-for-profit company, Aberdeen Heat and Power, supplies affordable heat to low income households and public buildings, and sells electricity to the network.
UK energy systems are in a period of significant socio-technical and political-economic change, with potential for major business innovations, breaking with UK history of centralised, large scale systems and markets. However, we know very little, firstly about the current local energy business sector, and its responses to opportunities, and secondly about business models and finance sources to support a transition to smart local energy systems (SLES), in line with the oft-cited 4Ds: Decarbonisation, Decentralisation, Digitalisation, and Democratisation.
To address these gaps, the EnergyREV Business and Financial practices team will analyse the local energy sector to map business structures and services, resources and rationales, and customers. Findings will be shared with practitioners, policy makers and publics, and used to inform thinking on next generation business models and financing.
At present we are creating a new database, harmonising multiple sources of publicly available information about the sector, including government and company websites, finance databases, media articles and specialised reports. The aim of this task is to understand companies’ financial situation and ownership, technology assets, income and revenue sources, customers, and benefits to communities. The final database will enable financial and business analysis of the sector, and inform the next stage of work.
The database currently includes 636 businesses from the energy sector. Most are small and medium size (81%) and with a significant proportion of larger companies (19%). Most are privately owned, but just under one fifth (18%) are civil society organisations, including community companies, trusts and foundations.
In many of the private companies there is also some community engagement: 29% declare provision of benefits to communities, usually via community funds.
As our work progresses, we will develop more detailed insights into the financial and business performance of the sector. Using what we learn, we will conduct new in-depth survey research with a strategic sample of about 100 companies and investigate routes to business and finance innovation for integrated, intelligent SLES. We also plan financial modelling to assess future investment options. The research is using real-world data to test theoretical ideas. New business and financial knowledge will support innovations for a more decentralised, clean, affordable, resilient and democratic, energy system and economy in the UK.